T-695-88
MacKay Construction Limited (Plaintiff)
v.
The Queen (Defendant)
INDEXED AS: MACKAY CONSTRUCTION LTD. V. CANADA
(T.D.)
Trial Division, Reed J.—Saskatoon, January 19;
Ottawa, January 25, 1989.
Income tax — Practice — Motion to strike statement of
claim for want of jurisdiction — M.N.R. issuing notice of
confirmation before taxpayer filing formal notice of objection
— Tax Court hearing and disposing of appeal — Failure to
file notice of objection not rendering subsequent proceedings
nullity — Minister waiving requirement of filing notice of
objection by taking step prescribed by statute (issuing notice of
confirmation) resulting in consequences also prescribed by
statute, s. 169 — S. 165(3) not applicable — Court's jurisdic
tion flowing from Income Tax Act, s. 172(1) and Federal
Court Act, s. 24.
Federal Court jurisdiction — Trial Division — M.N.R.
issuing notice of confirmation before taxpayer filing formal
notice of objection — Tax Court hearing and disposing of
appeal — Failure to file notice of objection not fatal to this
appeal as Federal Court's jurisdiction flowing from Income
Tax Act, s. 172(1) and Federal Court Act, s. 24 — Jurisdiction
founded upon Tax Court having rendered decision, not upon
filing of notice of objection — Procedural defect prior to Tax
Court decision irrelevant.
STATUTES AND REGULATIONS JUDICIALLY
CONSI DER ED
Federal Court Act, R.S.C., 1985, s. 24.
Federal Court Rules, C.R.C., c. 663, R. 419(1)(a).
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 152(1.1) (as
am. by S.C. 1977-78, c. 1, s. 76), 165(3) (as am. by
S.C. 1980-81-82-83, c. 158, s. 58), 169 (as am. idem),
172(1) (as am. idem).
CASES JUDICIALLY CONSIDERED
DISTINGUISHED:
Lapointe-Fisher Nursing Home, Limited v. Minister of
National Revenue (1986), 86 DTC 1357 (Tax CL);
Taubler, J. v. Minister of National Revenue (1987), 87
DTC 393 (Tax Ct.).
CONSIDERED:
Port Arthur and Rainy River Provincial Election (No. 3)
Re, Preston v. Kenny ( 1906), 13 O.L.R. 17 (C.A.).
COUNSEL:
Robert A. Kirkpatrick for plaintiff.
Naomi R. Goldstein for defendant.
SOLICITORS:
Robertson, Stromberg, Saskatoon, Saskatche-
wan, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for order ren
dered in English by
REED J.: The plaintiff is appealing, by way of
trial de novo, a decision of the Tax Court. The
defendant has brought a motion to strike the plain
tiff's statement of claim, pursuant to Rule
419(1)(a) of the Federal Court Rules [C.R.C., c.
663], on the ground that this Court has no juris
diction to hear the appeal (trial de novo). The
defendant argues that the plaintiff's action was not
instituted in any manner contemplated by the
Income Tax Act [S.C. 1971-72-73, c. 63]: specifi
cally, the plaintiff has never filed a notice of
objection sufficient to properly found its appeal to
the Tax Court. It is argued that all proceedings
which have taken place subsequent to that failure
are a nullity and thus there is no jurisdiction in
this Court to hear the appeal (claim).
The facts are as follows: in a notice of reassess
ment dated June 21, 1983, the plaintiff was
informed by Revenue Canada that there were no
taxes owing by it for the 1980 taxation year. On
September 16, 1983 the plaintiff filed a notice of
objection to this "nil assessment". The plaintiff
contested the classification of certain gains made
by it on the sale of a particular property. By letter
dated January 4, 1984 the plaintiff was informed
by Revenue Canada that one could not object to a
"nil assessment"; the plaintiff was advised to apply
for a determination of loss pursuant to subsection
152(1.1) [as am. by S.C. 1977-78, c. 1, s. 76] of
the Income Tax Act. The plaintiff did so and was
subsequently sent a notice of redetermination of a
loss dated April 30, 1984. At the same time the
plaintiff was sent a notice of confirmation by the
Minister, also dated April 30, 1984. That notice of
confirmation reads in part:
The formal objection(s) which you made to the notice(s) of
Redetermination of a Loss for income tax in respect of taxation
year(s) 1979 & 1980 has (Have) been carefully considered in
accordance with paragraph 165(3)(a) of the Income Tax Act.
The Minister of National Revenue has considered the facts
and reasons set forth in your Notice(s) of Objection and hereby
confirms that the Notices of Redetermination of a Loss has
(have) been made in accordance with the provisions of the
Income Tax Act for the following reasons:
Consequent upon receipt of the notice of confirma
tion the plaintiff proceeded with its appeal to the
Tax Court. This appeal was unsuccessful. It now
appeals that decision to this Court.
Counsel for the defendant argues that the Min
ister's notice of confirmation dated April 30, 1984
was a nullity because it could only be properly
issued after the taxpayer had filed a notice of
objection to the notice of redetermination of loss.
She argues that the filing of the notice of objection
is a statutory requirement which the Minister
cannot waive and that consequently everything
done after that date, including the issuing of the
notice of confirmation, is a nullity. Subsection
165(3) [as am. by S.C. 1980-81-82-83, c. 158, s.
58] of the Income Tax Act provides:
165....
(3) Upon receipt of a notice of objection under this section,
the Minister shall,
(a) with all due dispatch reconsider the assessment and
vacate, confirm or vary the assessment or reassess, or
(b) where the taxpayer indicates in the notice of objection
that he wishes to appeal immediately either to the Tax Court
of Canada or to the Federal Court and that he waives
reconsideration of the assessment and the Minister consents,
file a copy of the notice of objection with the Registrar of the
Tax Court or in the Registry of the Federal Court, as the
case may be,
and he shall thereupon notify the taxpayer of his action by
registered mail.
The decisions in Lapointe-Fisher Nursing Home,
Limited v. Minister of National Revenue (1986),
86 DTC 1357 (Tax Ct.) and Taubler, J. v. Minis
ter of National Revenue (1987), 87 DTC 393 (Tax
Ct.) were cited in support of the defendant's
position.
Counsel for the plaintiff argues that section 169
[as am. idem] of the Income Tax Act, not section
165(3), is the applicable section:
169. Where a taxpayer has served notice of objection to an
assessment under section 165, he may appeal to the Tax Court
of Canada to have the assessment vacated or varied after either
(a) the Minister has confirmed the assessment or reassessed,
or
(b) 180 days have elapsed after service of the notice of
objection and the Minister has not notified the taxpayer that
he has vacated or confirmed the assessment or reassessed;
but no appeal under this section may be instituted after the
expiration of 90 days from the day notice has been mailed to
the taxpayer under section 165 that the Minister has confirmed
the assessment or reassessed.
Counsel for the plaintiff argues that the significant
factor clothing the Tax Court with jurisdiction is
the issuing of the notice of confirmation by the
Minister, not the filing of the notice of objection
by the taxpayer. He also argues that the Taubler
and Lapointe decisions can be distinguished; and,
that it is inequitable to seek to deny the plaintiff
its appeal rights now, when no objection on the
ground of procedural defect has been made previ
ously. He notes that the objection being made is
based on an error made five years ago which error
was induced by the Minister's own error in sending
out the notice of confirmation before any formal
notice of objection had been filed by the taxpayer.
It is necessary, first of all, to review the deci
sions in the Lapointe and Taubler cases. In the
Lapointe case, taxes owed by a corporation for the
fiscal year ending March 31, 1978, were in issue.
The Minister sent a notice of assessment (dated
April 9, 1980) and then a notice of reassessment
(dated April 27, 1983). These were sent to a
non-existent company. The company was non
existent because it had been amalgamated into a
new corporation. A notice of objection was filed
with respect to the April 27, 1983 reassessment;
part of that objection cited the fact that the notice
of reassessment had been issued to a non-existent
company. An assessment with respect to the taxes
alleged to be owing was then sent on August 1,
1984 to the amalgamated company (assessment
#1122932). A notice of objection was not filed to
this assessment. Shortly after the August 1, 1984
assessment (#1122932) had been sent to the amal
gamated company, a letter was sent by officials of
Revenue Canada which stated, in part [at page
1360]:
The Notice of Assessment issued on August I, 1984 has the
effect of nullifying the earlier assessment and the Notice of
Objection filed in respect of 1978.
However, under the authority of Subsection 165(7) of the
Income Tax Act, you may appeal the Minister's action directly
to the Tax Court of Canada or the Federal Court without
serving a new Notice of Objection, or you may file a Notice of
Objection to assessment #1122932.
Judge Bonner of the Tax Court indicated that
he could not construe this letter as indicating a
waiver by the Department officials of the require
ment to file a notice of objection to assessment
#1122932. It is clear when the above-mentioned
paragraphs of the letter are read, in the context of
the letter as a whole and the statutory provision in
question, that the taxpayer was being told: either
the April 27, 1983 assessment could be appealed,
in which case no new notice of objection would be
required, since one had already been filed; or, the
assessment #1122932 which had been issued to the
new company could be appealed, in which case a
notice of objection would be required. Judge
Bonner went on to say, that even if he had been
able to construe the letter as a waiver of the
requirement to file a notice of objection this would
not be effective to clothe the Tax Court with
jurisdiction. He quoted the words of Moss C.J.O.
in Port Arthur and Rainy River Provincial Elec-
lion (No. 3) Re, Preston v. Kenny (1906), 13
O.L.R. 17 (C.A.), at page 20:
The Court must be careful to see that it does not usurp a
jurisdiction it does not possess. The jurisdiction it has is wholly
statutory, and only such as is conferred by the statute can be
exercised.
Judge Bonner held that officials of Revenue
Canada could not clothe the Tax Court with juris
diction by "waiving" a statutory requirement.
In the Taubler case a notice of assessment was
sent to the taxpayer; this was appealed by filing
with the Tax Appeal Board a notice of appeal but
not within the time limits prescribed for such
filing. The Minister filed a reply to the notice of
appeal. It was held that the Minister's filing of a
reply could not care the defective notice of appeal.
The taxpayer attempted to argue that although his
appeal had been filed out of time, the Minister's
filing of a reply thereto had cared or waived that
defect. The Tax Court held, at page 394, that it
was without jurisdiction to hear the appeal:
The filing by the respondent of a Reply to the Notice of
Appeal cannot remedy the late filing of the appeal. This does
not result in an estoppel. The respondent's actions could not
change the requirements set out in the Income Tax Act or give
effect to an invalid Notice of Appeal. I would cite the words of
Christie, C.J. (as he then was) in Jay Wollenberg v. M.N.R., 84
DTC 1055 at page 1057:
Estoppel is incapable of putting aside or overriding the
provisions of the Act as enacted by Parliament. There is
ample authority for this. I need only refer to two decisions of
the Federal Court—Trial Division and the cases referred to
therein: Stickle v. M.N.R., 72 DTC 6178, and Gibbon v. The
Queen, 77 DTC 5193.
Counsel for the plaintiff does not disagree with
the holdings in those two cases. He simply says
they do not apply in this case. With that argument
I agree.
It is first of all relevant to note that the "waiv-
er" which was alleged to exist in the Lapointe case
was based on a letter sent by departmental offi
cials. The waiver alleged in the Taubler case was
said to have occurred as a result of a procedural
step being taken in court proceeding (a reply being
filed) in response to an appeal which was filed
after the time for filing had expired. Neither of
these events, however, could be effective to over
rule a statutory requirement. In the present case,
the "waiver" if one can refer to it as such occurs
because the Minister has taken a step prescribed
by statute (the issuing of a notice of confirmation)
which itself is defined by statute as resulting in
certain consequences (see section 169 of the
Income Tax Act set out above). That is, I think
counsel for the plaintiff is correct when he says
that attention should be focused on section 169 of
the Income Tax Act and the consequences which
flow from the issuing, by the Minister, of a notice
of confirmation, rather than on section 165(3).
More importantly however, I do not think this
Court's jurisdiction in the case of an appeal from a
Tax Court decision is based on a notice of objec
tion having been filed. The situation may be differ
ent when an appeal is taken directly to this Court,
in the first instance, pursuant to section 165. In the
present case, however, this Court's jurisdiction
flows from subsection 172(1) of the Income Tax
Act and section 24 of the Federal Court Act
[R.S.C., 1985, c. F-7]. Subsection 172(1) [as am.
by S.C. 1980-81-82-83, c. 158, s. 58] of the
Income Tax Act provides:
172. (1) The Minister or the taxpayer may, within 120 days
from the day on which the Registrar of the Tax Court of
Canada mails the decision on an appeal under section 169 to
the Minister and the taxpayer, appeal to the Federal Court of
Canada.
Section 24 of the Federal Court Act states:
24. Except as otherwise provided by the Rules, the Trial
Division has original jurisdiction to hear and determine all
appeals that, under the Income Tax Act or the Estate Tax Act,
chapter E-9 of the Revised Statutes of Canada, 1970, may be
taken to the Court.
In my view, in a case such as the present, this
Court's jurisdiction is founded upon a decision of
the Tax Court having been rendered. A procedural
defect which occurred prior to that time is not
relevant. The defendant's motion will, therefore,
be dismissed. The plaintiff should have its costs of
this application in any event of the cause.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.